What Are dApps? How They Differ From Traditional Apps

Discover how dApps work, and the many exciting avenues they can provide access to.

An infant baby floating in space, poking an unidentified iridescent object with his finger driven by curiosity.
Created by Gabor Kovacs from DailyCoin

When you open your iPhone or Android, youโ€™re probably accustomed to seeing a wide range of app icons on your dashboard. However, not all apps are made equal, and some of the applications you may be seeing or even using could be decentralized. 

What Iโ€™m referring to here are dApps, applications that might look like your everyday app but that, due to their decentralized nature, can provide unique functions and services.ย 

Sponsored

While dApps can provide some handy benefits for crypto investors, they are also used in a variety of other fields, including gaming, social media, and NFTs. Therefore, itโ€™s certainly better late than never to learn about them, considering how many avenues they can open up.

What Is a dApp?

In simple terms, a dApp (decentralized application) is a software application that runs within a blockchain

Theyโ€™re not too dissimilar from traditional applications that many of us use in everyday life, such as Facebook Messenger or PayPal, for example. 

The key difference to remember is that dApps, as the name implies, are decentralized. As a result, they arenโ€™t controlled by a central authority or run on centralized servers. Instead, they function on peer-to-peer networks, removing the need for intermediaries. 

Left of the screen is centralized apps all connected to one data center. on the right is dApps which are connected together in a peer to peer network.
Source: Medium.com

For example, dApps, being decentralized, donโ€™t require personal data to start using. All you need is a crypto wallet, and youโ€™ll be good to go. 

dApps have become so admired because they can be designed for a near-limitless number of use cases. When it comes to cryptocurrency, though, they are primarily created to provide support with buying, selling, and managing assets. 

Smart Contracts & dApps

In order for dApps to function, they need an underlying set of rules that enable them to work without a third party, and this is what smart contracts are for. 

A smart contractโ€™s predetermined rules will be executed once the agreed conditions have been met, so in terms of a dApp, it ensures that all transactions and processes function as they should. You can think of smart contracts as a digital version of a real contract shared between two parties. 

A dApp will run off the rules of a smart contract, which is needed for dApps to function at all. Smart contracts negate the need for a third party since they allow people to digitally agree on an action or transaction, which happens in many dApp services. 

When Did dApps Appear? 

Though Bitcoin ushered in many key ideas and concepts that have been embraced in the modern crypto industry, it was actually Ethereum (ETH) that introduced dApps to the world. 

Ethereum features a Solidity programming language, which is designed to make it easy for developers to create fresh new dApps on the network. Ethereum therefore propelled dApps into the crypto mainstream soon after its launch, with the network now hosting over 4,000 dApps. 

Different Uses for dApps

Though the use cases for dApps are virtually limitless, they are among some of the most popular for those both in and outside the crypto ecosystem. 

Decentralized Exchanges (DEX)

Man with a phone showing a decentralised exchange market with a decentralised exchange also on a desktop in the background. One hand is holding a gold Bitcoin token.
Source: Medium.com

Though decentralized exchanges allow investors to access crypto markets just like their centralized counterparts, they donโ€™t have anyone running them from behind the scenes. Therefore, they need smart contracts to function, making them dApps, some of which have become extremely popular.

Examples of Decentralized Exchange dApps

For example, Pancakeswap and SushiSwap are among the most widely used protocol-based dApps that allow users to swap, buy, and sell digital assets without needing to rely on intermediaries. 

Uniswap is another popular DEX that has gained enormous popularity over the years due to its absence of listing fees and its governance token, which gives the community the power to vote on future updates and additions. 

NFT Marketplaces

Some User-facing dApps, like OpenSea, will grant users access to an NFT marketplace where they can freely browse and buy pieces of digital artwork that have all been compiled into one collective space.

Examples of NFT Marketplace dApps

Each of these services tends to come with its own unique functionalities and benefits. While OpenSea has a higher average price point, itโ€™s also home to many more active traders. MOOAR, on the other hand, is cheaper but features less liquidity. 

Meanwhile, Rarible, another popular NFT marketplace dApp, specializes in being available on as many networks as possible, making it very accessible and housing a staggering number of user creations.

Social Networks

dApps such as Steemit will enable users to post content as they would normally on traditional apps that act as social media platforms. The main difference is that with these networks, users can earn cryptocurrency for posting and creating content for users to admire. 

Some apps will even reward users for interacting in the most basic ways, such as commenting or liking a post. 

Examples of Social Network dApps

dApps like Steemit, Paragraph, and Lenster all provide a glimpse into what decentralized social media pages could look like in the hopeful future of a Web3 internet. 

Social media-based apps can also double as other tools to make them even more usable, such as Status.IM, for example, acts as both a wallet and a messaging app. If youโ€™re looking for a particular kind of media app, though, such as video-sharing, then there are also many niche options to choose from, such as Tape in the case of videos. 

Gaming

Decentraland area showing multiple people celebrating at a concert during the night time.
Source: Euronews.com

There’s even a hearty selection of crypto and blockchain-based games to show just how far-reaching these apps have become. These can range from fun and casual social simulators with built-in crypto integration to play-to-earn style experiences that reward users for the time they spend in the game. 

Examples of Gaming dApps

Some games, like Decentraland, allow users to build and trade their own virtual land, while others, such as CryptoKitties, are used to grow and eventually trade digital animals. 

Trading card dApp games have also become especially popular, such as Gods Unchained, where players can own their set of unique NFT cards to play with or trade if some new items catch their eye. 

Many of these games, such as Crabada, for example, market themselves as โ€˜play to earnโ€™ games, which enable players to bag some extra tokens just for interacting with the game and its players.  

Real Estate 

Thatโ€™s right. dApps have even spread into the real estate business. Their decentralized nature ensures that all transactions made on them are immutable and permanently recorded on the ledger.

This can not only be crucial when making real estate transactions that might need to be returned, but it also just speeds up the whole process thanks to the underlying smart contracts executing everything immediately. 

Examples of Real Estate dApps

On the one hand, youโ€™ve got dApps, which can help familiarize people with real estate transactions, such as Upland, where blockchain-backed assets represent real-world locations to buy and trade. 

On the other hand, you have dApps like Propy, which enable aspiring homeowners to partake in the real thing by removing all the paperwork so that users can send off transactions at a momentโ€™s notice. It can also be used by sellers and agents to quickly send off a document or payment without intermediaries slowing down the process. 

Healthcare

Blockchain technology can store, manage, and share patient data as part of a functional dApp. Since dApps provide a gateway into the blockchain network, healthcare workers can collect a large amount of data while still keeping their patientsโ€™ data and information private. 

Examples of Healthcare dApps

dApps exist in healthcare for both doctors and patients; Doctors can be supported by applications like MedRec or Solve. Care allows fast and easy access to necessary documents and files relating to a particular patient to quickly find relevant medication or prescriptions, saving time and effort. 

Health Wizz, on the other hand, is designed to be a safe and secure space for patients to manage and protect their personal data and medical history. No more writing down an appointment time or a checkup update; simply log it all down on Health Wizz, and itโ€™ll be safe and sound for you to return to when it’s most needed. 

DeFi Apps

By far the most popular kind of dApp, though, which crypto investors will especially appreciate, is DeFi apps (decentralized finance applications).

DeFi apps are built to provide financial instruments to investors. While decentralized exchanges are classed as DeFi apps, many other, much smaller User-Facing dApps specialize in delivering more specific financial services. 

Letโ€™s cover a few examples:

  • Aave: This DeFi app allows users to lend and borrow money. This is often tricky to do with fiat currency, requiring a lot of time and effort, but it can be done instantly with decentralized apps. 
  • MakerDAO: This app offers a decentralized stablecoin, the DAO, which is soft-pegged to the US dollar. It can be used for making purchases within the DeFi ecosystem, or just as a hedgefund. 
  • Harvest Finance/Tulip: Both these apps that offer yield farming – a strategy that involves lending, staking and locking crypto for a higher return. This is a risky investment option, but it does provide great profit potential for experienced traders who know how to use it effectively. 

The main reason these apps are so popular is that they provide an accessible route into financial support mechanisms that are often difficult to reach in the real world. 

dApps: Pros and Cons

As weโ€™ve already seen, dApps have proven to be a huge step forward in terms of making blockchain technology easy to access and effective for the average user. However, we still donโ€™t know a lot about them, meaning they are nowhere near perfect and harbor some underlying drawbacks. 

Benefits of dApps

  • Full Asset Ownership: No intermediaries are involved when exchanging any digital asset through a dApp. This negates the issue of unwanted tampering or even fees that will deduct the amount you can transfer. 
  • Blockchain Security: dApps are built atop blockchains, decentralized ledgers with tight-knit security measures. No single point of failure means that hacks and cyberattacks are very unlikely. Additionally, since transactions are immutable and canโ€™t be altered, they ensure that all transactions are fair and as promised. Most blockchains are also open-source, meaning anyone and everyone can test their security protocols to ensure full safety. 
  • Accessibility: Considering how complex Web3 and decentralized networks can seem, DeFi apps provide a user-friendly entry point into this innovative new world. This especially goes for DeFi apps which make accessing advanced financial methods much easier. 
  • Innovation: The number of use cases for dApps is endless, which has inspired a lot of innovation among developers in terms of what can be made. For example, while the Ethereum blockchain boasts the simplistic Solidarity building blocks, Chainlink (LINK) possesses an extensive network of data providers that can tap into many off-chain industries. This inspires competition and innovation. 
  • Use Cases: A major advantage of dApps is their endless potential. We are still in the early years of understanding just how far dApps’ use cases can go, as evident by their growth into new sectors each year. 

Drawbacks of dApps

  • Lacking UI: dApp development is expensive, especially DeFi, and they donโ€™t have the luxury of having teams of people around to keep the interfaces clean and concise with future updates. CEXs and other dApps, therefore, tend to lack interfaces that complement the user experience, which can take some getting used to. 
  • Blockchain Reliance: If a blockchain is congested or has a low storage capacity, this will affect transaction speeds and responsiveness across the board on the dApp. This issue of scalability and the maximum growth of a blockchain, therefore, becomes a burden on the dApps, too. 
  • Programming Vulnerabilities: Though dApps share the security of a blockchain, they are still only as secure as their underlying code. Users will need to trust the developer that what theyโ€™re using doesnโ€™t contain any vulnerabilities. 
  • Lengthy Update Intervals: The community decides on updates for a specific app. While this promotes a fair and equal system, it also means such changes can take much longer to agree on. 

On the Flipside 

  • DeFi apps can grow to staggering levels of popularity, but they can often prioritize technicality over utility.
  • They, therefore, tend to be inaccessible with rough interfaces and a lack of resources to get new users up to speed.

Why This Matters

Despite the technological possibilities they can offer, blockchains can be pretty complex to fully use, especially for the everyday trader. dApps are minimizing the freedom of blockchain decentralization to a user-friendly level, broadening the number of ways we can interact with crypto, and taking one step towards creating a decentralized Web3 internet. 

FAQs

How do Decentralized Blockchains Verify Transactions?

Blockchains will use a consensus algorithm where groups of miners or validators come together to verify transactions in-house, meaning the community does it, not a single entity like a bank. Proof-of-work, which Bitcoin (BTC) uses, and Proof-of-Stake, used by Ethereum and Cardano (ADA), are the two main examples of consensus algorithms.ย 

Is Telegram a dApp?

Although Telegram offers end-to-end encryption, it is still a centralized application.

What is the Most Popular Gaming dApp?

NFT Farmer, SecondLive and Crazy Defence Heroes have maintained some of the highest active user numbers since their introduction.

This article is for information purposes only and should not be considered trading or investment advice. Nothing herein shall be construed as financial, legal, or tax advice. Trading forex, cryptocurrencies, and CFDs pose a considerable risk of loss.

Tags
Author
Ewan Lewis

Ewan Lewis is a Blockchain Writer at DailyCoin who produces profile & educational articles. Ewan has minor holdings in Bitcoin and Ethereum.

Read more